Energy Morning - 17 June 2025

Energy Morning - 6 June 2025

Better across the board

Q1 slightly better than expected

Q1 in line - Shell contract termination a drag on estimates

Needs to lock in 2026

Offshore Drilling (DNB Markets) (, ) - (39 pages)

Sea1 Offshore (Buy, TP: NOK30.00) - Another strong performance

A strong start to the year included EBITDA and FCF above our estimates and consensus, driven by a solid operating performance, higher mobilisation income than we expected, and the reversal of an earlier recognised loss. We consider most items primarily isolated to Q1, and have made limited, but positive, estimate revisions, with few changes to its contract backlog since Q4. We reiterate our BUY and NOK30 target price.

Another round of Aramco suspensions expected

Market sources suggest Saudi Aramco will further reduce its rig count in the coming months through early contract terminations and potentially more suspensions, which would mark the ‘fourth round’ of rig reductions. This follows last month’s request for dayrate discussions (historically, such requests have preceded it suspending rigs). We believe this round could be extensive, affecting c10 jackups out of its current rig count of c57 rigs. At the peak, Aramco had 92 jackups (22% of global demand...

Sea1 Offshore (Buy, TP: NOK30.00) - Waiting for newbuilds

We forecast Q1 EBITDA of USD30m versus consensus of USD33m, as we expect low utilisation of the AHTS fleet due to yard stays and other idle time during the quarter. The recent sale of Sea1 Spearfish (above our NAV) was notable, in our view, and the stock is trading at a P/NAV of 0.6x. The sizeable newbuild programme (remaining capex of cUSD400m versus current EV of USD527m) is limiting near-term FCF and creating a more back-end-loaded cash flow profile than peers. We reiterate our BUY, but have ...

Muted 2025 growth expectations

Following Q1 earnings calls by some of the oil service companies, 2025 outlooks appear more challenging than previously. Baker Hughes expects international upstream spending to decline by mid- to high-single digits, while Halliburton sees its international revenues flat to slightly down. Furthermore, Weatherford expects 2025 international revenue to decline by low double- to mid-double digits. Precision Drilling flagged additional rig suspensions by Saudi Aramco, and SLB highlighted a slow start...

Demand recovery continues to be delayed

Should continue to be the relative winner

ENI capex cut but maintains shareholder returns

Driven by macro headwinds and uncertainty around trade tariffs, ENI was the first large oil company to introduce capex cuts for 2025, contributing to a more challenging business environment for oil services. Over the past five years, we estimate ENI to have been the oil major with strongest offshore spending growth, and it has been considered active and opportunistic while others have been more conservative. Hence, we see its reduction as a soft datapoint for oil services. ENI has optimised its ...

Welcomed tender from Petrobras

Updates suggest Petrobras yesterday launched a new tender for “one or more” deepwater rigs for the Buzios field starting late-2026/early-2027. As it has been a while since the last Petrobras tender, and there has been uncertainty related to the timing of upcoming tenders, we believe a new Petrobras tender would offer relief for investors. As we count nine rigs already contracted with Petrobras to match the start-up window, we expect the requirement would be filled by rigs already in the country,...

Looking at required day-rates

Although there are several ongoing deepwater tenders, the lack of recent deepwater fixtures has created uncertainty among investors related to day-rates. Consequently, we have analysed the required day-rates to support current share prices and valuations. Given the high operating leverage and multiple variables involved (utilisation, lifetime and cost of capital), we estimate the sector requires 7G drillship day-rates from the mid-USD300k and above to support the current share prices.

Energy Morning - 15 April 2025

E&P spending sensitivity explored

With an oil price at the mid-USD60s/bbl level, focus on the oil major overspending situation, and resulting impact on the outlook for offshore-focused oil services, is set to increase further. While oil companies would likely cut, or even eliminate, buyback programmes first, we expect increased focus on spending reductions and efficiencies, creating a more challenging business environment for oil services. Hence, we see a risk of oil companies taking a more cautious approach, resulting in projec...

Crude Quarterly Q1'25: weaker oil market fundamentals

Energy Morning - 25 March 2025

Pemex seeks national partnerships to accelerate developments

In line with its earlier communication about Pemex looking for partners to re-start drilling activities and fight oil production decline, local news reports suggest that Pemex is seeking partnerships for 17 blocks (11 offshore and six onshore) to secure external capital. It is mostly considering local partners and intends to take the role as operator in most of the blocks. At first glance, the expected volume from the partnerships looks to be small, with only 66kbd to be added by year-end 2025. ...